Yes, you can get 100% development finance but like all things, it depends on a few factors.
All lenders will look at the experience of the borrower. If the borrower is relatively inexperienced and is requesting all of the development finance and further capital to also buy or purchase the property, then they are unlikely to want to support the borrower. Not impossible but very unlikely.
However, if the borrower has retained the services of a good Quantity Surveyor (QS), has a detailed development appraisal and cash flow forecast, then certain lenders will still look at supporting the borrower with 100% development finance.
Is 100% development finance expensive?
Not necessarily so, in fact, a number of development finance products offered by lenders are as cheap or as inexpensive as those lenders offering simple bridging loans. Of course, recent volatility in the money markets regarding interest rates have made development finance a little bit more expensive than it once was but it still remains competitive especially when compared with other types of loans or finance.
The other thing to note about development finance is the other fees that you will have to pay such as the lenders arrangement fee, the exit fee, site visit fees, legal and valuation fees.
Not to mention there will also be fees to pay to the QS such as their initial report and for every subsequent visit they make to the development.
Employ the right professional team
Making sure you have the right professional team on your project is essential if you want to make it work and also deliver a reasonable profit at the end of the development.
New borrowers often make the mistake of employing friends or family to help them out with things such as the construction or the financial forecasting and that is a big mistake. The quality of your professional team such as your architect, your solicitor, your accountant and your main contractor, can make or break your project.
The other thing to consider is which lender you are going to be working with to fund your development. Lots of lenders say they have funding but when it comes down to drawing down the money for each stage of your development, many lenders are found wanting and in turn, that means that you will be unable to finish your development and are therefore at risk of being left with an unfinished development and that will make it very difficult to sell or to even refinance.
Key Features of 100% development finance
- All of the funds required to build your property can be provided
- These funds will include professional fees such as planning applications and architects fees
- Money is drawdown in stages
- Loan terms can be up to 24 months maximum
- Lenders will insist on retaining a QS to monitor the build – paid for by the borrower
- All legals fees (both lenders and borrowers) are paid for by the borrower
Is development finance available all over the UK?
Yes it is but there are less lenders available to lend in Scotland and that is purely and simply down to the different legal process which is required in Scotland compared to that in England and Wales. Currently there are no development finance lenders that we are aware of that will lend in Northern Ireland.
Furthermore, the majority of lenders will be unlikely to fund a development in a rural area as this will make saleability more difficult than it will in an urban area where there is more demand for housing.
Frequently Asked Questions
What are the minimum and maximum loan amount available with development finance?
This is where it differs from bridging loans because development loans tend to start with a minimum loan of £100,000 and will go up to a maximum loan of £50 million. Again, this is entirely dependent on the quality and experience of the borrower and of the location.
What is a typical interest rate on a development finance loan?
Whilst many brokers will tell you that you can get rates as low as 0.45% per month, the reality is that most development finance rates tend to be in the region of 1% a month
Do all lenders have exit fees?
No they don’t. We will search the market and return a list of development finance lenders who will lend without the need for an exit fee or at the very least, a reduced exit fee.
How do I apply for a 100% development finance loan?
Simply input your contact details in the form on the right hand side of the site on one of our team will get back to you to start the process. But don’t worry, we will do everything for you and take you through the process step-by-step.